(CN) – CompuCredit and a bank with which it partnered to market Aspire Visa credit cards can arbitrate claims that they misled consumers, the Supreme Court ruled Tuesday.
Though the consumers had signed arbitration agreements when they applied for the credit cards, they claimed that violations of the Credit Repair Organizations Act (CROA) preclude that agreement’s enforcement.
Those alleged violations include advertising an unfeasible credit limit and misleading consumers that they could use the credit card to rebuild poor credit. Synovus Bank now owns the original credit card issuer, Columbus Bank and Trust.
In their arguments before the Supreme Court, the consumers had pointed to two provisions of CROA. They said the disclosure provision gives consumers the right to sue, and the nonwaiver provision prohibits the waiver of “any right of the consumer under this subchapter.” Since the arbitration agreement waived the right to bring an action in a court of law, they claimed it could not be enforced.
The Supreme Court found otherwise on Tuesday, disagreeing with both a federal judge and the 9th Circuit.
“The flaw in this argument is its premise: that the disclosure provision provides consumers with a right to bring an action in a court of law,” Justice Antonin Scalia wrote for the majority. “It does not. Rather, it imposes an obligation on credit repair organizations to supply consumers with a specific statement set forth (in quotation marks) in the statute. The only consumer right it creates is the right to receive the statement, which is meant to describe the consumer protections that the law elsewhere provides.”
“Had Congress meant to prohibit these very common provisions in the CROA, it would have done so in a manner less obtuse than what respondents suggest,” Scalia added. “That Congress would have sought to achieve the same result in the CROA through combination of the nonwaiver provision with the “right to sue” phrase in the disclosure provision, and the references to ‘action’ and ‘court’ in the description of damages recoverable, is unlikely.”
Though Justices Sonia Sotomayor and Elena Kagan agreed congressional intent was lacking, they said it was “a much closer case than the majority opinion suggests.”
“As the majority opinion notes, the disclosure provision does not itself confer a cause of action, and the liability provision that does is materially indistinguishable from other statutes that we have held not to preclude arbitration,” according to the concurring opinion authored by Sotomayor. “In my mind this leaves the parties’ arguments in equipoise, and our precedents require that petitioners prevail in this circumstance. This is because respondents, as the opponents of arbitration, bear the burden of showing that Congress disallowed arbitration of their claims, and because we resolve doubts in favor of arbitration. Of course, if we have misread Congress’ intent, then Congress can correct our error by amending the statute.”
In a sharp dissent, Justice Ruth Bader Ginsburg rebuked her colleagues for trampling the common man.
“The court today holds that credit repair organizations can escape suit by providing in their take-it-or-leave-it contracts that arbitration will serve as the parties’ sole dispute-resolution mechanism,” Ginsburg wrote. “The ‘right to sue,’ the court explains, merely connotes the vindication of legal rights, whether in court or before an arbitrator. That reading
But Congress enacted the CROA with vulnerable consumers in mind – consumers likely to read the words ‘right to sue’ to mean the right to litigate in court, not the obligation to submit disputes to binding arbitration.”
“I believe Congress meant what an ordinary reader of the disclosure requirement would likely comprehend: A credit repair organization that engages in deceptive practices may be sued in court,” she added. “Reducing the required disclosure to insignificance, the court’s construction of the CROA scarcely advances the act’s goals.”
Scalia took issue with that barb, saying “the disclosure provision informs consumers of their right to enforce liability for any failure to conform to the statute – information they might otherwise not possess.”
“It is the dissent’s interpretation that effectively reduces a portion of the CROA to a nullity,” he continued. “Interpreting the ‘right to sue’ language in §1679c(a) to ‘create’ a right to sue in court not only renders it strikingly out of place in a section that is otherwise devoted to giving the consumer notice of rights created elsewhere; it also renders the creation of the ‘right to sue’ elsewhere superfluous.”